Federal checks soon electronic, not paper

L.M. Sixel

Updated 9:47 pm, Friday, January 11, 2013

The check will no longer be in the mail, and some folks aren't too happy about that.

Starting March 1, people who receive benefits from the Social Security Administration, the Supplemental Security Income program, the Veterans Administration, and Railroad Retirement and federal employee pension plans will no longer be able to receive a paper check.

Recipients either must sign up for direct deposit into their checking accounts or receive their funds through a debit card.

The government will save $1 billion over the next 10 years by shifting to electronic funds distribution, said Walt Henderson, director of the Go Direct campaign for the U.S. Treasury. He also said it's safer for recipients who don't have to worry about lost or stolen checks.

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Opponents, though, point to high fees for the debit-card option, confusion as seniors try to use ATMs and debit cards for the first time, and fears that the new electronic system will make personal identity theft easier. Still others point to struggling veterans who may have no home base and no bank accounts.

"We ought to let seniors choose a method that works for them rather than forcing them to use the method that works for the government," said John Runyan, executive director of Consumers for Paper Options.

The Treasury Department has hired a public relations firm to publicize the March 1 deadline and try to persuade the 5 million people still receiving paper checks that electronic banking is a good idea.

But Runyan argues there is a reason so many seniors and disabled people haven't signed up for the electronic program despite the looming deadline.

"There is a digital divide in this country," he said.

The Pew Research Center recently reported that only 53 percent of seniors age 65 and older use the Internet or e-mail. The telephone surveys of 2,254 adults have a margin of error of plus or minus 2.7 percentage points.

And 8.2 percent of the nation's households are "unbanked," with no kind of deposit account at an insured institution, Runyan said. He cited data from the Federal Deposit Insurance Corp., which studied the financial habits of nearly 45,000 households with the U.S. Census Bureau.

Hardships cited

Runyan questioned taking "someone who isn't even participating in the banking system" and make him or her figure out a piece of complicated machinery and remember a personal identification number or PIN. He said his 88-year-old father can no longer manage his own finances through direct deposit and went back to old-fashioned checks because it's easier to keep up with the bookkeeping.

While Runyan's group is supported by the Envelope Manufacturers Association - a group with a vested interest in continuing the tradition of paper checks - it's also reaching out to groups concerned with privacy, legal and convenience issues.

Many depend on disability payments from the Veterans and Social Security administrations and may not be able to wait for electronic funds in case of delays, said Fowler. Many are doing well just to pay the bills, he added.

Government saves

Many employers in the private sector stopped handing out paper checks years ago. Texas and many other states use debit cards and direct deposit to pay unemployment benefits.

Runyan said he understands why states have turned over their payment programs to debit-card providers: it saves the governments money. But the participants often end up paying high fees.

Federal recipients get one free ATM withdrawal each month, provided they use the Direct Express network. After that, they are charged a 90-cent fee for each ATM withdrawal, said Henderson, adding that there is no fee to use the card at retailers that accept debit cards.

Cardholders have to pay 75 cents per month if they want to be mailed a paper statement. Those who want to transfer their funds from the card to a U.S. bank account must pay $1.50 per transaction. Those who live overseas also would face a 3 percent U.S. currency conversion fee plus a $3 ATM fee, according to the Social Security website.

Lose your card? That will cost you $4 (after one free replacement each year) plus another $13.50 if you want overnight delivery.